Indian banks are expected to achieve a credit growth of 12.5 per cent in the financial year 2025, according to a report by HSBC Securities and Capital Markets (India) Private Limited published on Friday.
However, the report also cautioned that a slowdown in GDP growth could pose risks, keeping credit expansion range-bound in 2024-25.
The report further highlighted several challenges, “Multiple headwinds like tight liquidity conditions, muted growth in deposits, GDP slowdown and high loan-to-deposit ratio remain key risks to credit growth.”
Despite these concerns, the retail loan sector showed positive momentum in November 2024, driven by strong demand for unsecured personal loans, steady growth in home and gold loans, and some recovery in credit extended to non-banking financial companies (NBFCs).
Non-food credit grew by 12.2 per cent year-on-year in November 2024, compared to 12 per cent in October, with month-on-month growth improving to 1.3 per cent from 0.7 per cent.
Retail loans increased by 13.3 per cent year-on-year and 1.5 per cent month-on-month, while loans to micro, small, and medium enterprises (MSMEs) rose by 13.8 per cent year-on-year and 0.7 per cent month-on-month.
Corporate loans also saw a rise of 9.6 per cent year-on-year and 1.5 per cent month-on-month.
The report pointed to broad-based growth in most retail loan segments. Home loans expanded by 12.2 per cent year-on-year and 1.3 per cent month-on-month in November, up from 0.9 per cent growth in October. Demand for residential housing is expected to keep this segment stable.
Gold loans recorded significant growth, rising by 6.7 per cent month-on-month, contributing to 12 per cent of incremental retail loans in November.
The report noted, “In our view, slowdown in microfinance loans has increased the demand for gold loans as an alternate source of borrowings.”
On the other hand, vehicle loans declined by 1.8 per cent month-on-month, reflecting subdued vehicle sales.
Credit card receivables grew by 18.1 per cent year-on-year in November, up from 16.9 per cent in October.
However, receivables growth is higher than growth in spending through credit cards.
